Making Prepaid Cards Better

Prepaid cards are a growing segment in the financial sector — a way to get paid and to pay bills.

Eric Johnson, Dean of Vanderbilt’s Owen Graduate School of Management, wrote recently that it’s important these cards have protections in place for consumers.

Here’s some of what he had to say:

Nearly a third of Tennessee’s households are unbanked or underbanked. Many of these families are unable to receive their paychecks quickly by direct deposit and are turning to prepaid cards, a growing category in the payments industry.

For these individuals, cards on the Visa, MasterCard or American Express networks function like a checking account and can be used to set up direct deposits of wages or benefits.

Prepaid card accounts do not require a credit check and most do not allow for overdrafts, making them available even to those who cannot get a bank account.

And, regarding consumer protection:

In addition, many prepaid cards do not have the same federal law protection against fraud, unauthorized charges and errors that bank debit cards have.

To address these issues, the new regulations give prepaid cards the same fraud protections as debit cards. The rules provide a simple, uniform chart of fees and allows people to check their account balances and transaction history for free. Under the new rules, workers must be told of the fees before they accept a payroll card and be reminded they have a choice. The rule caps overdraft fees and requires the fees to be affordable.

We agree that prepaid cards must have key protections in place so consumers are treated fairly. We’ll be watching this issue closely and updating with a call to action if necessary.

For more on consumer protection in Tennessee, follow @TNCitizenAction


 

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